- 28 -
sustain respondent's position as to the amount allowed for the
loss on the Cavalier.
III. Section 6662(a) Accuracy-Related Penalty
Respondent determined that petitioners are liable for the
accuracy-related penalty. Section 6662(a) and (b)(1) provide
that an amount equal to 20-percent of that portion of the
underpayment that is attributable to negligence or disregard of
rules or regulations shall be added to the tax. Negligence is
the failure to exercise due care or to do what a reasonable and
ordinarily prudent person would do under the circumstances.
Neely v. Commissioner, 85 T.C. 934, 947 (1985). Negligence
includes failure to make a reasonable attempt to comply with
provisions of the Internal Revenue Code. Sec. 6662(c).
Petitioner has the burden of proving that respondent's
determination is in error. Rule 142(a); Bixby v. Commissioner,
58 T.C. 757 (1972).
Taxpayers have a duty to keep accurate records and to
carefully prepare their returns. See secs. 6001, 6011; secs.
1.6001-1(a), 1.6011-1(b), Income Tax Regs.
Petitioner overstated 13 out of 16 items listed on his
Schedule C primarily by duplication. Most of the duplication
errors occurred when he prepared the scratch pads, which he then
used to compute total deductible expenses. As petitioner listed
expenses on the scratch pads, he forgot that the DAC system
included the MYM expenses. He transferred the MYM expenses into
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011